The information contained in this
report is unaudited and does not comprise statutory accounts within
the meaning of section 434 of the Companies Act 2006 ('the Act').
The statutory accounts for the year ended 31 December 2022 have
been filed with the Registrar of Companies. The report of the
auditor on those statutory accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under section 498(2) or (3) of the Act.
This
report provides a summary of the unaudited business and financial
trends for the year ended 31 December 2023 for Santander UK Group
Holdings plc and its subsidiaries (Santander UK), including its
principal subsidiary Santander UK plc. The unaudited business and
financial trends in this statement only pertain to Santander UK on
a statutory basis (the statutory perimeter). Unless otherwise
stated, references to results in previous periods and other general
statements regarding past performance refer to the business results
for the same period in 2022.
This
report contains non-IFRS financial measures that are reviewed by
management in order to measure our overall performance. These are
financial measures which management believe provide useful
information to investors regarding our results and are outlined as
Alternative Performance Measures in Appendix 1. These measures are
not a substitute for IFRS measures. A list of abbreviations is
included at the end of this report and a glossary of terms is
available at:
https://www.santander.co.uk/about-santander/investor-relations/glossary
Santander UK Group Holdings
plc
Quarterly Management Statement
for the year ended 31 December 2023
|
Paul Sharratt
|
Head of Investor Relations
|
ir@santander.co.uk
|
|
Stewart Todd
|
Head of
Communications and Responsible Banking
|
mediarelations@santander.co.uk
|
|
For more
information:
|
See Investor Update presentation
|
www.santander.co.uk
|
Mike Regnier, Chief Executive Officer,
commented:
"During 2023 our focus has been on supporting our customers
through the higher cost of living and increased interest rates. We
have proactively contacted 2.5 million customers to offer help and
also supported homeowners through the Government's Mortgage
Charter.
"Despite the difficult backdrop, our prudent approach to risk
and the hard work of everyone at Santander UK has delivered a
strong set of results for 2023. Their dedication to putting
customers first has helped us deliver competitive rates for savers,
introduce corporate clients to new international markets, protect
millions of customers from fraud, refurbish branches and open new
Work Cafés. I was very proud to move into our new sustainable head
office in Milton Keynes, offering state-of-the-art working
facilities and a hub for the local community.
"As we look ahead to 2024, we expect interest rates and
inflation to fall. We will continue to execute on strategic
initiatives focused on building customer loyalty, creating value
and simplifying our business. By working together with Banco
Santander Group, we will harness the best of our local and global
capabilities to develop new and innovative products and services
for our customers and deliver the benefits of our
scale."
2023 financial and business highlights
We continued to help and support our
customers
|
§
|
2.5 million customers offered
support to help with the increased cost of living.
|
|
|
§
|
Strong deposit proposition with
top-of-market savings rate in September and Edge Up current account
paying interest and cashback.
|
|
|
§
|
Continued to prioritise our
customers' needs, offering the right products and services,
underlining our commitment to Consumer Duty.
|
|
|
§
|
Announced a £6m adult education
programme to train people in digital, green and leadership
skills.
|
|
|
§
|
NPS ranked 5th for
Retail and 1st for Corporate. Customer service is
integral to our strategy and remains a key area of
focus1.
|
Good set of results with profit before tax up 13% to £2,149m
(2022: £1,894m), with RoTE2 of 14.4% (2022:
12.0%)
|
§
|
Banking NIM2 of 2.20%
(2022: 2.06%) largely driven by higher base rate and balance sheet
management; down from 9M-23: 2.23%.
|
|
§
|
CIR2 of 48% (2022: 47%)
as increased income and efficiency savings largely offset the
pressure of two years of high inflation.
|
|
§
|
Our multi-year transformation
programme concluded with £794m reduction in costs so far following
£1bn planned investment.
|
|
§
|
Credit impairment charges down 36%
to £206m following improved macroeconomic outlook. Cost of
risk2 of 10bps (2022: 15bps).
|
Customer loans and deposits reduced following disciplined
pricing actions
|
§
|
With a
slower housing market and higher mortgage rates, applications fell
in 2023.
|
|
§
|
Our
decision to optimise the balance sheet given higher funding costs
contributed to a reduction of £11.9bn in mortgage
lending.
|
|
§
|
Customer
deposits reduced by £2.9bn in 2023. The trend of balance movement
from current to savings accounts slowed in Q4-23.
|
|
§
|
As a
result of active balance sheet management, our LDR reduced to 108%
(Dec-22: 113%).
|
Our strategy delivers strong liquidity, funding and capital
with prudent approach to risk
|
§
|
Strong LCR of 162% (Dec-22: 163%)
with liquidity pool of £50.9bn (Dec-22: £49.0bn).
|
|
§
|
Customer deposits are mainly
retail with low average balances, 86% of these are covered by
depositor guarantee scheme (FSCS).
|
|
§
|
85% of lending is prime UK retail
mortgages with an average LTV of 51% (Dec-22: 50%). Unsecured
retail constitutes 3% of lending.
|
|
§
|
Corporate customers diversified
across sectors. Low exposure to CRE and BTL, 2% and 8% of total
customer loans respectively.
|
|
§
|
Stage 3 ratio of 1.49%,
normalising from a low base (Dec-22: 1.24%) with a modest increase
in arrears and a smaller mortgage book.
|
|
§
|
CET1 capital ratio of 15.2%
(Dec-22: 15.2%) and UK leverage ratio of 5.1% (Dec-22: 5.2%)
following £1.5bn dividends paid in 2023
(2022: £1.0bn), including £750m special dividend.
|
|
§
|
Total capital requirement reduced
because of a 1.6pp reduction in Pillar 2A. This results in c.£2bn
lower MREL requirements in 2024.
|
|
§
|
Repaid £8.0bn TFSME in 2023 as
planned with £17.0bn outstanding. Stable and diversified wholesale
funding programmes.
|
Looking ahead
|
§
|
After initial falls in H2-23, we
expect inflation to fall further in 2024 which will help ease cost
of living pressures for our customers.
|
|
§
|
We expect to continue balance
sheet optimisation in 2024, leading to lower deposits and mortgage
lending as we continue to prioritise profitability, capital
generation and our core banking franchise.
|
|
§
|
As previously guided, Banking
NIM2 is likely to be lower going forward. We expect the
impact of any base rate reductions and pressure on new business
margins to be partially offset by increased contribution to income
from the structural hedge and pricing discipline.
|
|
§
|
We intend to continue our focus on
cost management supported by additional investment as part of our
strategy to drive further digitalisation, efficiency and
simplification.
|
|
1.
|
See page 12 for more on NPS.
|
|
2.
|
Non-IFRS measure. See Appendix 1 for details
and a reconciliation of APMs to the nearest IFRS
measure.
|
Income statement and balance sheet
|
Summarised consolidated income
statement 2023 vs 20221
|
2023
|
2022
|
Change
|
|
|
£m
|
£m
|
%
|
|
Net interest income
|
4,667
|
4,472
|
4
|
|
Non-interest
income2
|
509
|
534
|
(5)
|
|
Total operating income
|
5,176
|
5,006
|
3
|
|
Operating expenses before credit
impairment (charges) / write-backs, provisions and
charges
|
(2,485)
|
(2,370)
|
5
|
|
Credit impairment (charges) /
write-backs
|
(206)
|
(321)
|
(36)
|
|
Provisions for other liabilities and
charges
|
(336)
|
(421)
|
(20)
|
|
Profit before tax
|
2,149
|
1,894
|
13
|
|
Tax on profit
|
(553)
|
(471)
|
17
|
|
Profit after tax
|
1,596
|
1,423
|
12
|
|
Banking NIM3
|
2.20%
|
2.06%
|
14bps
|
|
CIR2
|
48%
|
47%
|
1pp
|
Profit before tax up 13%
|
§
|
Net
interest income up 4%, largely due to the impact of higher base
rates alongside active balance sheet management including
disciplined deposit pricing. The fourth quarter Banking
NIM3 was impacted by higher deposit costs following the
eSaver campaign launched in Sep-23.
|
|
§
|
Non-interest income down 5%, largely due to lower fees
volume, as well as unrealised gains in 2022 which were not
repeated. These were partially offset by the gain from the sale of
Euroclear shares in H1-23.
|
|
§
|
Operating
expenses4 up 5%, as inflationary pressures on costs were
only partially offset by ongoing savings from the transformation
programme which began in 2019 as well as cost management
discipline.
|
|
§
|
Credit
impairment charges down 36%, reflecting an
improved macroeconomic outlook in Q4-23 which benefited ECL despite
a modest increase in arrears and Stage 3 ratio.
|
|
§
|
Provisions for other liabilities and charges down 20%, as the
2022 FCA fine related to historical shortcomings in our AML
controls was not repeated this year. Fraud losses were also
lower in 2023.
|
|
§
|
Tax on
profit increased by £82m, largely due to higher profits and an
increase in underlying tax rates. This was partially offset by a
reduction in the Bank Corporation Tax Surcharge rate.
|
|
Summarised balance sheet
|
31.12.23
|
31.12.22
|
|
|
£bn
|
£bn
|
|
Customer loans
|
206.7
|
219.7
|
|
Other assets
|
75.4
|
72.5
|
|
Total assets
|
282.1
|
292.2
|
|
|
|
|
|
Customer deposits
|
193.6
|
196.5
|
|
Total wholesale funding
|
55.8
|
63.0
|
|
Other liabilities
|
17.7
|
18.0
|
|
Total liabilities
|
267.1
|
277.5
|
|
Shareholders' equity
|
15.0
|
14.7
|
|
Total liabilities and equity
|
282.1
|
292.2
|
|
1.
|
See Appendix 1 for details and a
reconciliation of APMs previously included in this
table.
|
|
2.
|
Comprises 'Net fee and commission
income' and 'Other operating income'.
|
|
3.
|
Non-IFRS measure. See Appendix 1
for details of APMs, a reconciliation to the nearest IFRS measure
and a prior period adjustment for 2022.
|
|
4.
|
Operating expenses before credit
impairment (charges) / write-backs, provisions and
charges.
|
Customer balance sheet analysis
|
Customer loans
|
31 December
2023
|
|
31 December
2022
|
|
|
Total
|
Stage 1
|
Stage 2
|
Stage
31
|
|
Total
|
Stage 1
|
Stage 2
|
Stage
31
|
|
|
£bn
|
%
|
%
|
%
|
|
£bn
|
%
|
%
|
%
|
|
Retail & Business
Banking
|
182.3
|
88.3
|
10.5
|
1.27
|
|
194.6
|
91.5
|
7.4
|
1.08
|
|
- Mortgages
|
175.2
|
88.5
|
10.4
|
1.16
|
|
187.1
|
91.8
|
7.3
|
0.99
|
|
- Credit Cards
|
2.7
|
85.4
|
12.9
|
2.95
|
|
2.5
|
85.7
|
12.9
|
2.53
|
|
- UPLs
|
2.1
|
84.4
|
14.3
|
1.32
|
|
2.0
|
87.3
|
11.7
|
1.07
|
|
- Overdrafts
|
0.5
|
43.9
|
50.1
|
6.73
|
|
0.5
|
33.5
|
61.0
|
5.93
|
|
- Business Banking
|
1.8
|
86.5
|
6.3
|
7.25
|
|
2.5
|
88.3
|
5.3
|
6.55
|
|
Consumer Finance
|
5.2
|
93.1
|
6.3
|
0.53
|
|
5.4
|
93.0
|
6.5
|
0.54
|
|
Corporate & Commercial
Banking
|
17.9
|
77.1
|
19.1
|
4.14
|
|
18.5
|
78.3
|
18.8
|
3.08
|
|
Corporate Centre
|
1.3
|
99.8
|
0.1
|
0.10
|
|
1.2
|
99.6
|
0.3
|
0.10
|
|
Total
|
206.7
|
87.5
|
11.1
|
1.49
|
|
219.7
|
90.4
|
8.4
|
1.24
|
|
Customer deposits
|
31.12.23
|
31.12.22
|
|
|
£bn
|
£bn
|
|
Retail & Business
Banking
|
158.3
|
161.8
|
|
- Current accounts
|
65.0
|
76.6
|
|
- Savings accounts
|
77.5
|
67.0
|
|
- Business banking
accounts
|
10.6
|
12.2
|
|
- Other retail products
|
5.2
|
6.0
|
|
Corporate & Commercial
Banking
|
24.1
|
24.8
|
|
Corporate Centre
|
11.2
|
9.9
|
|
Total
|
193.6
|
196.5
|
Resilient customer loan portfolios
|
Arrears over 90 days past due
%
|
Mortgages
|
Credit
Cards
|
UPL
|
Overdrafts
|
Business
Banking
|
Consumer
Finance
|
|
31 December 2023
|
0.80
|
0.51
|
0.73
|
2.43
|
4.15
|
0.43
|
|
31 December 2022
|
0.62
|
0.49
|
0.61
|
2.24
|
3.47
|
0.44
|
Prudent approach to risk evident across product
portfolios
|
§
|
Mortgages: average stock LTV of 51% (Dec-22: 50%) and average
new loan size of £228k (2022: £237k). £45bn of new business and
internal transfers were re-priced in 2023 and a further £39bn will
reach end of incentive period by the end of 2024. Arrears from
recent internal transfers remains low, with less than 1% of
customers entering arrears within 12 months.
|
|
§
|
Credit
Cards: 55% (2022: 55%) of customers repay full balance each
month.
|
|
§
|
UPL:
average customer balances £6k (Dec-22: £6k).
|
|
§
|
Overdrafts: relatively small overall balance of £0.5bn,
unchanged from 2022.
|
|
§
|
Business
Banking: includes £1.7bn (Dec-22: £2.4bn) of BBLS with 100%
Government guarantee.
|
|
§
|
Consumer
Finance: 87% (Dec-22: 84%) of lending is collateralised on the
vehicle.
|
|
1.
|
Non-IFRS measure. See Appendix 1
for details and a reconciliation of APMs to the nearest IFRS
measure.
|
Economic scenarios and ECL
Economic scenarios updated
|
§
|
Our base case was updated to reflect the
latest market data and to broadly align with latest consensus
estimates. The most notable change was to HPI with expected house
price falls now lower in 2023 and 2024.
|
|
§
|
The stubborn inflation scenario reflects a
situation where inflation remains persistently above the Bank of
England target, leading to further base rate increases. This also
adds to cost of living pressures and falling consumer
demand.
|
|
§
|
The other
downside scenarios capture a range of risks, including continuing
weaker investment, a larger negative impact from the EU trade deal
and a continuing and significant mismatch between job vacancies and
skills, as well as a smaller labour force.
|
|
§
|
The upside
scenario incorporates a quicker economic recovery.
|
|
§
|
Scenario
weights unchanged from Q3-23, and Upside increased by 5pp from
Dec-22 which was offset by a change in Downside 1.
|
|
Economic
scenarios 31-Dec-231
|
Upside
%
|
Base
case
%
|
Downside
1
%
|
Stubborn
Inflation
%
|
Downside
2
%
|
Weighted
%
|
|
GDP
(calendar
year annual growth rate)
|
2023
|
0.6
|
0.5
|
0.5
|
0.5
|
0.3
|
0.5
|
|
2024
|
1.0
|
0.4
|
-0.1
|
-1.8
|
-3.3
|
-0.4
|
|
2025
|
2.1
|
1.3
|
0.2
|
-0.9
|
-1.4
|
0.6
|
|
2026
|
2.4
|
1.5
|
0.5
|
0.4
|
0.6
|
1.1
|
|
2027
|
2.4
|
1.4
|
0.3
|
0.7
|
2.2
|
1.4
|
|
|
2028
|
2.4
|
1.4
|
0.3
|
0.8
|
2.6
|
1.4
|
|
|
Peak to
trough2
|
0.0
|
0.0
|
-0.2
|
-2.8
|
-5.1
|
-1.1
|
|
Base
rate
(At 31 December)
|
2023
|
5.25
|
5.25
|
5.25
|
5.25
|
5.25
|
5.25
|
|
2024
|
4.25
|
4.50
|
5.25
|
6.50
|
3.75
|
4.88
|
|
2025
|
3.25
|
3.50
|
4.00
|
5.00
|
2.00
|
3.68
|
|
2026
|
2.75
|
3.25
|
3.25
|
3.75
|
2.00
|
3.18
|
|
2027
|
2.75
|
3.00
|
3.00
|
3.00
|
2.50
|
2.93
|
|
|
2028
|
2.75
|
3.00
|
3.00
|
3.00
|
2.50
|
2.93
|
|
|
5 year
Peak
|
5.25
|
5.25
|
5.75
|
6.50
|
5.25
|
5.55
|
|
HPI
(Q4 annual
growth rate)
|
2023
|
-1.7
|
-2.2
|
-4.7
|
-6.3
|
-7.8
|
-3.8
|
|
2024
|
2.0
|
-1.0
|
-11.7
|
-18.8
|
-25.8
|
-7.8
|
|
2025
|
6.5
|
2.5
|
3.4
|
3.6
|
3.6
|
3.3
|
|
2026
|
5.1
|
3.0
|
2.1
|
1.6
|
1.6
|
2.7
|
|
2027
|
4.0
|
3.0
|
3.0
|
1.6
|
1.6
|
2.7
|
|
2028
|
3.6
|
3.0
|
3.1
|
1.8
|
1.8
|
2.7
|
|
Peak to
trough2
|
-3.7
|
-6.5
|
-17.5
|
-25.5
|
-33.0
|
-13.8
|
|
Unemployment
(At 31 December)
|
2023
|
4.3
|
4.3
|
4.3
|
4.3
|
4.4
|
4.3
|
|
2024
|
4.3
|
4.8
|
4.8
|
5.6
|
8.5
|
5.3
|
|
2025
|
3.7
|
4.4
|
4.9
|
5.9
|
8.0
|
5.1
|
|
2026
|
3.4
|
4.3
|
5.2
|
6.2
|
7.4
|
5.0
|
|
2027
|
3.0
|
4.3
|
5.4
|
6.1
|
6.8
|
4.9
|
|
2028
|
3.0
|
4.2
|
5.3
|
5.8
|
6.2
|
4.7
|
|
5 year
Peak
|
4.5
|
4.8
|
5.5
|
6.2
|
8.5
|
5.5
|
|
|
|
|
|
|
|
|
|
Weight
Dec-23:
|
10%
|
50%
|
10%
|
20%
|
10%
|
100%
|
|
|
|
|
|
|
|
|
| |
|
ECL
31-Dec-23
(100% weight to each scenario)
|
Upside
£m
|
Base
case
£m
|
Downside
1
£m
|
Stubborn
Inflation
£m
|
Downside
2
£m
|
Weighted
£m
|
|
Retail
& Business Banking
|
420
|
467
|
538
|
692
|
891
|
544
|
|
Consumer
Finance
|
68
|
69
|
70
|
72
|
72
|
70
|
|
Corporate
& Commercial Banking
|
346
|
362
|
385
|
415
|
449
|
380
|
|
Corporate
Centre
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total
|
834
|
898
|
993
|
1,179
|
1,412
|
994
|
2023 ECL provision decreased by £13m to £994m (2022: £1,007m)
largely due to updated economic assumptions
|
§
|
Gross write-off utilisation of £232m
in CCB and unsecured retail (2022: £157m).
|
|
1.
|
Santander UK's Q4-23 forecast used
for ECL calculation.
|
|
2.
|
GDP peak is taken from GDP level at
Q2-23. HPI peak is taken from HPI level at Q3-22.
|
Treasury
|
Key
metrics
|
31 December
2023
|
|
31 December
2022
|
|
|
£bn
|
%
|
|
£bn
|
%
|
|
Liquid assets / LCR
|
50.9
|
162
|
|
49.0
|
163
|
|
CET1 capital
|
10.5
|
15.2
|
|
10.8
|
15.2
|
|
Total qualifying regulatory
capital
|
14.8
|
21.4
|
|
14.5
|
20.4
|
|
UK leverage (T1 capital)
|
12.5
|
5.1
|
|
12.9
|
5.2
|
|
RWA
|
69.1
|
-
|
|
71.2
|
-
|
|
LDR
|
-
|
108
|
|
-
|
113
|
|
Total wholesale funding and
AT1
|
58.0
|
-
|
|
65.2
|
-
|
|
- term funding
|
50.4
|
-
|
|
57.8
|
-
|
|
- TFSME
|
17.0
|
-
|
|
25.0
|
-
|
|
- with a residual maturity of less
than one year
|
11.9
|
-
|
|
11.0
|
-
|
|
|
CET1
capital ratio MDA trigger (headroom 3.9%)
|
Minimum
%
|
|
|
Pillar 1
|
4.5
|
|
|
Pillar 2A
|
2.3
|
|
|
Capital conservation
buffer
|
2.5
|
|
|
Countercyclical capital
buffer
|
2.0
|
|
|
Current MDA trigger
|
11.3
|
|
|
|
|
|
|
|
|
| |
Strong liquidity
position
|
§
|
Strong LCR of 162%, (Dec-22: 163%),
with £19.4bn surplus LCR eligible liquid assets to requirement.
NSFR of 138%, (Dec-22: 137%).
|
|
§
|
LCR eligible liquidity pool of
£50.9bn (Dec-22: £49.0bn), includes £38.4bn cash and central bank
reserves (Dec-22: £44.5bn).
|
|
§
|
Term duration in the LCR eligible
liquidity pool is hedged with swaps to offset mark to market
movements from interest rate changes.
|
Diversified funding across
well-established issuance programmes
|
§
|
LDR reduced to 108%, with lower
customer lending and deposits after pricing actions to optimise the
customer balance sheet, with mortgage lending down £11.9bn and
customer deposits down £2.9bn.
|
|
§
|
Issued c.£5.6bn medium term funding
across a range of currencies, including c.£1.5bn of MREL issuance
and c.£4.1bn of other secured issuance from Santander UK plc. Also
issued £1.1bn of Tier 2 securities which were bought by Banco
Santander.
|
Capital ratios well above
regulatory requirements
|
§
|
The CET1 capital ratio remained
stable at 15.2%. Higher profit and a reduction in RWA exposure was
partially offset by the dividends paid.
|
|
§
|
RWAs
decreased with lower mortgage lending and active balance sheet
management.
|
|
§
|
UK
leverage ratio remained broadly stable at 5.1% (Dec-22: 5.2%). UK
leverage exposure broadly stable at £247.2bn (Dec-22:
£248.6bn).
|
|
§
|
Total capital ratio increased to
21.4% (Dec-22: 20.4%) as a result of higher total qualifying
capital, lower RWA and Tier 2 issuances.
|
|
§
|
Pillar 2A regulatory requirement
reduced by 1.6pp in Dec-23.
|
|
§
|
Paid £1.5bn interim dividends, £750m
of which was a special dividend (2022: £1.0bn and £300m
respectively).
|
|
§
|
Remain very strongly capitalised
with significant headroom to minimum requirements and
MDA.
|
Structural hedge
evolution
|
§
|
Our structural hedge position
decreased, with c.£106bn at Dec-23 (Dec-22: c.£108bn), and duration
of c.2.4 years (Dec-22: c.2.5 years).
|
|
§
|
The balance on the structural hedge
fell in 2023, reflecting lower non-rate sensitive liabilities. The
overall contribution to income has however increased as maturities
were replaced with higher yielding term assets offsetting the lower
balance. Going forward, we expect the overall contribution of
the structural hedge to continue to increase.
|
Summary segmental
information
|
Segmental analysis 2023
|
Customer
loans
|
Customer
deposits
|
RWA
|
Profit / (loss)
before tax
|
|
|
£bn
|
£bn
|
£bn
|
£m
|
|
Retail & Business
Banking
|
182.3
|
158.3
|
43.2
|
1,718
|
|
Consumer Finance
|
5.2
|
-
|
7.4
|
174
|
|
Corporate & Commercial
Banking1
|
17.9
|
24.1
|
13.6
|
570
|
|
Corporate Centre
|
1.3
|
11.2
|
4.9
|
(313)
|
|
Total
|
206.7
|
193.6
|
69.1
|
2,149
|
|
Segmental analysis 2022
|
Customer
loans
|
Customer
deposits
|
RWA
|
Profit / (loss)
before tax
|
|
|
£bn
|
£bn
|
£bn
|
£m
|
|
Retail & Business
Banking
|
194.6
|
161.8
|
44.6
|
1,545
|
|
Consumer Finance
|
5.4
|
-
|
7.3
|
198
|
|
Corporate & Commercial
Banking1
|
18.5
|
24.8
|
14.0
|
345
|
|
Corporate Centre
|
1.2
|
9.9
|
5.3
|
(194)
|
|
Total
|
219.7
|
196.5
|
71.2
|
1,894
|
Retail & Business Banking
|
§
|
Lower
lending with reduced mortgage balance alongside a reduction in
customer deposits. Profitability increased significantly as a
result of balance sheet optimisation and increases in base rate
with disciplined deposit pricing.
|
Consumer Finance
|
§
|
Lower
lending than 2022, as a decision was made to exit from two small
business streams, with a focus on value and capital
generation.
|
Corporate & Commercial Banking
|
§
|
Delivered
strong financial performance in 2023 with client growth, balance
sheet management and higher profitability with the impact of higher
base rates. Focus on clients' international needs, connecting
1,500 companies to our global network to support their
international growth in 2023.
|
Corporate Centre
|
§
|
The
impact of base rate on Crown Dependency liabilities and unrealised
gains in 2022 which were not repeated, partially offset by the gain
from the sale of Euroclear shares in H1-23 contributed to higher
loss before tax.
|
FCA
review of Motor Finance commission
The FCA
has initiated a review of historical commission arrangements
between motor finance firms and dealers which we anticipate will
bring clarity for both customers and motor finance firms alike on
this important issue. In line with the FCA's announcement, we have
paused the response to customer complaints until at least 20
November 2024. Santander has received a small number of county
court claims and complaints in respect of its historical use of
discretionary commission arrangements (DCAs), including a claim
brought against SCUK plc and others in the Competition Appeal
Tribunal (CAT). While it is possible that certain charges may be
incurred in relation to existing or future county court claims,
Financial Ombudsman Service (FOS) complaints and the CAT
proceedings, it is not considered that a legal or constructive
obligation has been incurred in relation to these matters that
would require a provision to be recognised at this stage. The
resolution of such matters is not possible to predict with any
certainty and there remain significant inherent uncertainties
regarding the existence, scope and timing of any possible outflow
which make it impracticable to disclose the extent of any potential
financial impact.
|
|
|
1.
|
CCB customer loans includes £4.6bn
of CRE loans (2022: £4.5bn).
|
|
Appendix 1 - Alternative Performance
Measures
In addition to the financial
information prepared under IFRS, this Quarterly Management
Statement contains non-IFRS financial measures that constitute
APMs, as defined in ESMA guidelines. The financial measures
contained in this report that qualify as APMs have been calculated
using the financial information of the Santander UK group but are
not defined or detailed in the applicable financial information
framework or under IFRS.
In 2024, we intend to cease reporting adjusted profit metrics
including adjusted CIR and adjusted RoTE.
a)
Adjusted profit metrics
Profit before tax is adjusted for
items management believe to be significant. We adjust for these to
facilitate operating performance comparisons from period to period.
No adjustments have been made for net interest income and credit
impairment (charges) / write-backs.
|
|
Ref.
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
Non-interest income
|
|
|
|
|
Reported
|
(i)
|
509
|
534
|
|
Adjust for transformation related
net loss / (gain) on sale of property
|
|
(3)
|
7
|
|
Adjusted
|
(ii)
|
506
|
541
|
|
|
|
|
|
|
Operating expenses before credit impairment (charges) /
write-backs, provisions and charges
|
|
|
|
|
Reported
|
(iii)
|
(2,485)
|
(2,370)
|
|
Adjust for transformation
|
|
126
|
171
|
|
Adjusted
|
(iv)
|
(2,359)
|
(2,199)
|
|
|
|
|
|
|
Provisions for other liabilities and charges
|
|
|
|
|
Reported
|
|
(336)
|
(421)
|
|
Adjust for transformation
|
|
56
|
22
|
|
Adjust for penalty related to
historical shortcomings in AML controls
|
|
-
|
108
|
|
Adjusted
|
|
(280)
|
(291)
|
|
|
|
|
|
|
Profit before tax
|
|
|
|
|
Reported
|
|
2,149
|
1,894
|
|
Specific income, expenses and
charges
|
|
179
|
308
|
|
Adjusted
|
|
2,328
|
2,202
|
Prior period adjustment: In
Q1-23 we removed the operating lease depreciation adjustment to
non-interest income and operating expenses to align to Banco
Santander's presentation. Prior periods were restated, there was no
impact on adjusted profit. In 2022 adjusted non-interest income and
adjusted operating expenses increased by £74m and the adjusted CIR
increased by 1pp to 44%.
Net loss / (gain) on sale of property:
previously named 'net gain on sale of London head
office and branch properties', now also includes subsequent sale of
property under our transformation programme.
Transformation costs and charges: relate to a multi-year project to deliver on our strategic
priorities and enhance efficiency in order for us to better serve
our customers and meet our medium-term targets.
Adjusted CIR
Calculated as adjusted total
operating expenses before credit impairment (charges) /
write-backs, provisions and charges as a percentage of the total of
net interest income and adjusted non-interest income.
|
|
Ref.
|
2023
|
2022
|
|
CIR
|
(iii) divided by the sum of (i) +
net interest income
|
48%
|
47%
|
|
Adjusted CIR
|
(iv) divided by the sum of (ii) + net interest
income
|
46%
|
44%
|
b) Adjusted
RoTE
Calculated as adjusted profit after
tax attributable to equity holders of the parent, divided by
average shareholders' equity less non-controlling interests, other
equity instruments and average goodwill and other intangible
assets. We consider this adjusted measure useful for management and
investors as a measure of income generation on shareholder
investment, as we focus on improving returns through our multi-year
transformation programme.
|
|
2023
|
Adjust for
transformation
|
As
adjusted
|
|
|
|
£m
|
£m
|
£m
|
|
|
Profit after tax
|
1,596
|
129
|
1,725
|
|
|
Less non-controlling interests of
annual profit
|
-
|
|
-
|
|
|
Profit / adjusted profit due to
equity holders of the parent (A)
|
1,596
|
|
1,725
|
|
|
|
|
|
|
|
|
|
2023
|
Equity
adjustments
|
As
adjusted
|
|
|
|
£m
|
£m
|
£m
|
|
|
Average shareholders'
equity
|
14,839
|
|
|
|
|
Less average Additional Tier 1 (AT1)
securities
|
(2,196)
|
|
|
|
|
Average ordinary shareholders'
equity (B)
|
12,643
|
|
|
|
|
Average goodwill and intangible
assets
|
(1,549)
|
|
|
|
|
Average tangible equity (C)
|
11,094
|
32
|
11,126
|
|
|
Return on ordinary shareholders'
equity (A/B)
|
12.6%
|
|
-
|
|
RoTE (A/C)
|
14.4%
|
|
15.5%
|
|
|
|
|
|
| |
|
|
2022
|
Adjust for
transformation
|
As
adjusted
|
|
|
£m
|
£m
|
£m
|
|
Profit after tax
|
1,423
|
254
|
1,677
|
|
Less non-controlling interests of
annual profit
|
(17)
|
|
(17)
|
|
Profit / adjusted profit due to
equity holders of the parent (A)
|
1,406
|
|
1,660
|
|
|
|
|
|
|
|
2022
|
Equity
adjustments
|
As
adjusted
|
|
|
£m
|
£m
|
£m
|
|
Average shareholders'
equity
|
15,545
|
|
|
|
Less average Additional Tier 1 (AT1)
securities
|
(2,194)
|
|
|
|
Less average non-controlling
interests
|
(118)
|
|
|
|
Average ordinary shareholders'
equity (B)
|
13,233
|
|
|
|
Average goodwill and intangible
assets
|
(1,548)
|
|
|
|
Average tangible equity
(C)
|
11,685
|
63
|
11,748
|
|
Return on ordinary shareholders'
equity (A/B)
|
10.6%
|
|
-
|
|
RoTE (A/C)
|
12.0%
|
|
14.1%
|
Adjustment for transformation
Details of these items are
outlined in section a) of Appendix 1, with a total impact on profit
before tax of £179m. The impact of these items on the taxation
charge was £50m and on profit after tax was £129m. Tax is
calculated at the standard rate of corporation tax including the
bank surcharge, except for items such as conduct provisions which
are not tax deductible.
Equity adjustments
These adjustments are made to
reflect the impact of adjustments to profit on average tangible
equity.
c) Other non-IFRS measures and their
calculations
|
§
|
Banking
NIM: Annualised net interest income divided by average customer
loans for the period.
(2023: £212,086m; 2022: £216,644m).
|
|
§
|
Cost of
risk: Sum of credit impairment (charges) or write-backs for the
last 12-month period as a percentage of average customer loans for
the last 12 months. (2023: £212,086m; 2022: £216,644m).
|
|
§
|
Cost-to-income ratio: Total
operating expenses before credit impairment (charges) or
write-backs, provisions and charges as a percentage of the total of
net interest income and non-interest income.
|
|
§
|
RoTE:
Profit after tax attributable to equity holders of the parent,
divided by average shareholders' equity less non-controlling
interests, other equity instruments and average goodwill and other
intangible assets.
|
|
§
|
Non-interest income: Net fee and commission income plus other
operating income.
|
|
§
|
Stage 3 ratio: The sum of Stage 3
drawn and Stage 3 undrawn assets divided by the sum of total drawn
assets and Stage 3 undrawn assets.
|
|
Appendix 2 - Additional information
Mortgage metrics
|
31.12.23
|
31.12.22
|
|
|
Stock average
LTV1
|
51%
|
50%
|
|
|
New business average
LTV1
|
66%
|
69%
|
|
|
London lending new business average
LTV1
|
65%
|
66%
|
|
|
BTL proportion of loan
book
|
9%
|
9%
|
|
|
Fixed rate proportion of loan
book
|
89%
|
89%
|
|
|
Variable rate proportion of loan
book
|
8%
|
7%
|
|
|
SVR proportion of loan
book
|
2%
|
3%
|
|
|
FoR proportion of loan
book
|
1%
|
1%
|
|
|
Proportion of customers with a
maturing mortgage retained2
|
77%
|
81%
|
|
|
Average loan size
(stock)3
|
£188k
|
£184k
|
|
|
Average loan size (new
business)
|
£228k
|
£237k
|
|
|
|
|
|
| |
Interest rate risk
|
NII
sensitivity4
|
2023
|
2022
|
|
|
£m
|
£m
|
|
+100bps
|
218
|
238
|
|
-100bps
|
(220)
|
(194)
|
|
§
|
The table
above shows how our net interest income would be affected by a
100bps parallel shift (both up and down) applied instantaneously to
the yield curve. Sensitivity to parallel shifts represents the
amount of risk in a way that we think is both simple and
scalable.
|
|
Summarised changes to CET1 capital ratio in
2023
|
|
|
CET1 capital
ratio
|
|
|
|
|
|
%
|
|
|
31 December 2022 CET1 capital
ratio
|
|
|
15.2
|
|
|
Profit
|
|
|
+2.2pp
|
|
|
Dividends on ordinary
shares
|
|
|
-1.1pp
|
|
|
AT1 coupons
|
|
|
-0.2pp
|
|
|
Special dividend
|
|
|
-1.0pp
|
|
|
Pension
|
|
|
-0.3pp
|
|
|
Expected loss less
provisions
|
|
|
-0.1pp
|
|
|
RWA growth and other
|
|
|
+0.5pp
|
|
|
31
December 2023 CET1 capital ratio
|
|
|
15.2
|
|
|
|
|
|
|
| |
|
1.
|
Balance weighted LTV.
|
|
2.
|
Applied to mortgages four months post maturity
and is calculated as a 12-month average of retention rates to
Sep-23 and Dec-22 respectively.
|
|
3.
|
Average initial advance of existing
stock.
|
|
4.
|
Based on modelling assumptions of repricing
behaviour.
|
List of abbreviations
|
AML
|
Anti-Money Laundering
|
|
APM
|
Alternative Performance
Measure
|
|
AT1
|
Additional Tier 1
|
|
BBLS
|
Bounce Back Loan Scheme
|
|
Banco Santander
|
Banco Santander S.A.
|
|
Banking NIM
|
Banking Net Interest
Margin
|
|
BTL
|
Buy-To-Let
|
|
CCB
|
Corporate & Commercial
Banking
|
|
CET1
|
Common Equity Tier 1
|
|
CIB
|
Corporate & Investment
Banking
|
|
CIR
|
Cost-To-Income Ratio
|
|
CRE
|
Commercial Real Estate
|
|
ECL
|
Expected Credit Losses
|
|
ESMA
|
European Securities and Markets
Authority
|
|
EU
|
European Union
|
|
FoR
|
Follow on Rate
|
|
FCA
|
Financial Conduct
Authority
|
|
FSCS
|
Financial Services Compensation
Scheme
|
|
GDP
|
Gross Domestic Product
|
|
HPI
|
House Price Index
|
|
IFRS
|
International Financial Reporting
Standards
|
|
LCR
|
Liquidity Coverage Ratio
|
|
LDR
|
Loan-to-Deposit Ratio
|
|
LTV
|
Loan-To-Value
|
|
MDA
|
Maximum Distributable
Amount
|
|
MREL
|
Minimum Requirement for own funds
and Eligible Liabilities
|
|
NPS
|
Net Promoter Score
|
|
NSFR
|
Net Stable Funding Ratio
|
|
PRA
|
Prudential Regulation
Authority
|
|
RoTE
|
Return on Tangible
Equity
|
|
RWA
|
Risk-Weighted Assets
|
|
Santander UK
|
Santander UK Group Holdings
plc
|
|
SVR
|
Standard Variable Rate
|
|
TFSME
|
Term Funding Scheme with additional
incentives for SMEs
|
|
UK
|
United Kingdom
|
|
UPL
|
Unsecured personal loans
|
Retail NPS: Our customer experience research was subject to independent
third party review. We measured the main banking NPS of 17,015
consumers on a six month basis using a 11-point scale (%Top 2 -
%Bottom 7). The reported data is based on the six months ending 31
December 2023, and the competitor set included in the ranking
analysis is Barclays, Halifax, HSBC, Lloyds Bank, Nationwide,
NatWest Group (Natwest & RBS) and TSB.
December 2023: NPS ranked
5th for Retail, we note a margin of error which impacts
those from 3rd to 5th and makes their rank
statistically equivalent.
December 2022: NPS ranked
6th for Retail, we note a margin of error which impacts
those from 4th to 6th and makes their rank
statistically
equivalent.
Business & Corporate
NPS: Business and corporate NPS is measured
by the MarketVue Business Banking from Savanta. This is an ongoing
telephone based survey designed to monitor usage and attitude of UK
businesses towards banks. 14,500 structured telephone interviews
are conducted each year among businesses of all sizes from new
start-ups to large corporates. The data is based upon 8,275
interviews made in twelve months ended 15 December 2023 with
businesses turning over from £0 - £500m per annum and are weighted
by region and turnover to be representative of businesses in Great
Britain. NPS recommendation score is based on an 11-point scale
(%Top 2 - %Bottom 7). The competitor set included in this analysis
is Barclays, RBS, HSBC, Lloyds Bank and NatWest.
December 2023: NPS ranked
1st for Business & Corporate.
December 2022: NPS ranked
1st for Business & Corporate.
Additional information about
Santander UK and Banco Santander
Santander UK is a financial
services provider in the UK that offers a wide range of personal
and commercial financial products and services. At 31 December
2023, the bank had around 19,800 employees and serves around 14
million active customers, 7 million digital customers via a
nationwide 444 branch network, telephone, mobile and online
banking. Santander UK is subject to the full supervision of the FCA
and the PRA in the UK. Santander UK plc customers' eligible
deposits are protected by the FSCS in the UK.
Banco Santander (SAN SM, STD US,
BNC LN) is a leading retail and commercial bank, founded in 1857
and headquartered in Spain and is one of the largest banks in the
world by market capitalization. Its primary segments are Europe,
North America, South America and Digital Consumer Bank, backed by
its secondary segments: Santander Corporate & Investment
Banking (Santander CIB), Wealth Management & Insurance
(WM&I) and PagoNxt. Its purpose is to help people and
businesses prosper in a simple, personal and fair way. Banco
Santander is building a more responsible bank and has made a number
of commitments to support this objective, including raising over
€120 billion in green financing between 2019 and 2025, as well as
financially empowering more than 10 million people over the same
period.
At 30 September 2023, Banco
Santander had 1.3 trillion euros in total funds, 166 million total
customers, of which 28 million are loyal and 54 million are
digital, 9,000 branches and over 212,000 employees.
Banco Santander has a standard
listing of its ordinary shares on the London Stock Exchange and
Santander UK plc has preference shares listed on the London Stock
Exchange.
None of the websites referred to in
this Quarterly Management Statement, including where a link is
provided, nor any of the information contained on such websites is
incorporated by reference in this Quarterly Management
Statement.
Disclaimer
Santander UK Group Holdings plc
(Santander UK) and Banco Santander caution that this announcement
may contain forward-looking statements. Such forward-looking
statements are found in various places throughout this
announcement. Words such as "believes", "anticipates", "expects",
"intends", "aims" and "plans" and other similar expressions are
intended to identify forward-looking statements, but they are not
the exclusive means of identifying such statements. Forward-looking
statements include, without limitation, statements concerning our
future business development and economic performance. These
forward-looking statements are based on management's current
expectations, estimates and projections, and Santander UK and Banco
Santander caution that these statements are not guarantees of
future performance. We also caution readers that a number of
important factors could cause actual results to differ materially
from the plans, objectives, expectations, estimates and intentions
expressed in such forward-looking statements. We have identified
certain of these factors in the forward-looking statements on page
271 of the Santander UK Group Holdings plc 2022 Annual Report.
Investors and others should carefully consider the foregoing
factors and other uncertainties and events. Undue reliance should
not be placed on forward-looking statements when making decisions
with respect to Santander UK, Banco Santander and/or their
securities. Such forward-looking statements speak only as of the
date on which they are made, and we do not undertake any obligation
to update or revise any of them, whether as a result of new
information, future events or otherwise. Statements as to
historical performance, historical share price or financial
accretion are not intended to mean that future performance, future
share price or future earnings for any period will necessarily
match or exceed those of any prior quarter.
Santander UK is a frequent issuer in
the debt capital markets and regularly meets with investors via
formal roadshows and other ad hoc meetings. In line with Santander
UK's usual practice, over the coming quarter it expects to meet
with investors globally to discuss this Quarterly Management
Statement, the results contained herein and other matters relating
to Santander UK.
Nothing in this announcement
constitutes or should be construed as constituting a profit
forecast.
